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This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate. This calculator factors in PMI (Private Mortgage Insurance) for loans where less than 20% is put as a down payment. Also taken into consideration are the town property taxes, and their effect on the total monthly mortgage payment.
A Second Mortgage is a Property Lien placed behind a First
Mortgage
A second mortgage is a loan that you take against the equity
that you have already built into your home by paying off some of
the principal balance on your first mortgage loan.
Historically the total amount of debt from the first and second
mortgage combined could not be more than 80% of the total market
value of the home. However, record low interest rates and a
competitive lenders marketplace have created a lending
environment where some lenders are approving second mortgages
that, when combined with first mortgage balance, is totaling as
high as 130% of the home value.
However, financial advisors will tell you that carrying that
much debt on your home is never a good idea.
Because a second mortgage is a property lien that is placed
behind the first mortgage, this means that in the event of a
default, after the property is sold the first mortgage gets paid
in its entirety, including any legal costs and other costs of
the sale, before the second mortgage can be paid. If there is
not enough money from the sale of the home, the second mortgage
does not get paid.
A Higher Interest Rate
When determining the interest rate that a lender is willing to
loan money out for a home mortgage, he looks at the risk level
to him for loaning that money. This is the reason that a high
risk borrower with a poor credit history gets charged a higher
interest rate than a low risk borrower with a strong credit
history.
The same theory holds true with a second mortgage. Because the
lender of the second mortgage is second to be paid off in the
event of a default, and because there is a greater chance that
there might not be enough equity in the home to pay off the
second mortgage in full, second mortgages are usually given at a
higher interest rate than are first mortgages; irregardless of
who the borrower is.
Shorter Terms
Although you will have choices for terms when selecting your
second mortgage, in general the terms given for them are shorter
than those of a first mortgage. This is primarily because the
amount of the second mortgage is generally much lower than that
of the first mortgage.
Second mortgage repayment terms can vary considerably, so it is
important that you look around for the one that is best for you.
For the most part they range in length from 2 – 20 years, with
the majority of second mortgage loans being 5 – 10 years.
Just as the length of the second mortgage can vary, so can other
repayment terms. The majority of second mortgages are paid back
in equal monthly payments with a portion of the payment going to
interest and a portion to the principal balance, just like a
first mortgage. However, some are different such as those known
as interest only or balloon mortgages. In that case your monthly
payment will go only towards interest and the entire principal
will be due at the end of the second mortgage term.
When considering a second home mortgage, be sure to shop around
and then talk to lenders to ensure that you get the best deal
for you!
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